One of the biggest benefits of refinancing your credit card debt into a personal loan with a lower interest rate is reducing the amount you pay in interest charges. A personal loan also gives you more time to pay off your debts, which could help you get your financial situation back on track through better financial discipline and budgeting. Depending on your situation, you may benefit from refinancing your debt in other ways, such as:
Easy budgeting and tracking
Juggling multiple credit card debts can be stressful. You may find it easier to budget and manage your bills by refinancing your debts into a single personal loan. Having only one repayment to make each month also reduces your chances of missing a repayment date.
Save on annual fees
If you’re struggling with credit card debt, this could help you put your credit card spending on hold and focus on reducing your debt instead. If you are no longer using a credit card, you may consider transferring your debt to a lower interest rate personal loan and closing unused credit accounts to save on annual fees.
However, it’s good to know that keeping existing accounts can sometimes improve your credit rating by keeping the average age of your account high. Therefore, it is essential to weigh the pros and cons before deciding to close an existing credit card account, as the payment history associated with the card will also be deleted from your file.
Improved credit score
When you apply for a personal loan, the credit grantor will thoroughly investigate your file before approving your application. This can have a temporary impact on your credit score. However, if the new loan helps you anticipate your debts, the benefits could outweigh any negative impact on your long-term credit score.